Integrating Blockchain with ERP for a Transparent …

1 PERSPECTIVEI ntegrating Blockchain with ERP for a Transparent Supply ChainAbstractSupply chain is complex today. Multi-echelon, highly disjointed, and geographically spread are some of the cornerstones of today s supply chain. All these together with different governmental policies and human behavior make it almost impossible to probe incidents and trace events in case of supply chain disruptions. In effect, an end-to-end supply chain, from the most basic raw material to the final product in a customer s possession, is opaque. The inherent cost involved in managing supply chain intermediaries, their reliability, traceability, and transparency further complicate the supply chain.

2 The solution to such complicated problems lies in improving supply chain transparency. This is now possible with the concept of Blockchain . The usage of Blockchain in a financial transaction is well known. This paper reviews Blockchain technology, which is changing the face of supply chain and bringing in transparency and authenticity. This paper first discusses the history and evolution of Blockchain from the bitcoin network, and goes on to explore the protocols. The author takes a deep dive into the design of Blockchain , exploring its five pillars and three-layered architecture, which enables most of the blockchains today. with the architecture, the author focuses on the applications, use cases, road map, and challenges for Blockchain in the supply chain domain as well as the synergy of Blockchain with enterprise applications.

3 It analyzes the integration of the enterprise resource planning (ERP) system of the supply chain domain with Blockchain . It also explores the three distinct growth areas: ERP- Blockchain supply chain use cases, the middleware for connecting the Blockchain with ERP, and Blockchain as a service (BaaS). The paper ends with a brief conclusion and a Document 2017 Infosys LimitedExternal Document 2017 Infosys LimitedModern supply chain: IntroductionHistory and introduction to Blockchain Supply chains toward the end of the last millennium were mainly powered by internal databases with on-premise computing capabilities driven mainly by Oracle, IBM, and Microsoft databases and technologies.

4 with the advent of the new millennium, a new generation of distributed platforms was introduced to run on cloud, enabling the outsourcing of some processes and efficient storage facilities and cost. This has helped supply chain processes to be more global with the ability to source and manufacture with the best economy, have optimized quality, be nearest to the market, and pass on more value to the customer. However, it has ended up being more complex. with these processes enabled by the system, the transactions have inefficiencies, fraud, pilferages with more and more regulations and compliance, a greater trust deficit, and need more monitoring.

5 This has given rise to numerous codes like the Universal Product Code (UPC), United Nations Standard Products and Services Code (UNSPSC), compliance with Country Of Origin (COO) and Restriction of Hazardous Substances (RoHS), and the advent of escrow, and clearing house services to name a few. This brings us to the topic for this study Blockchain . The example quoted above points to a very pertinent aspect: can we map, link, trace, and make the entire supply chain of the product visible from cradle to grave? As of today, we can t, but there are new developments in technology and communication architecture which can make these possible.

6 The answer to this lies in the technology of the Blockchain . The bitcoin network uses Blockchain technology. A simple explanation of the term Blockchain is a distributed ledger, which is a list of transactions that is shared among a number of computers, rather than being stored on a central server. This distributed ledger guarantees security as well as transparency. An example of a Blockchain transaction will be the register of transfer of goods between two parties (identified as two addresses in the Blockchain ). The transaction lodged into the Blockchain will have supply-chain-relevant information These help supply chain be more reliable but add to its cost.

7 The need of the hour is to bring in visibility, but it is next to impossible with the existing architecture. Even if it can be brought, having visibility can be extremely costly due to the need of resources as well as an agreement for global supply chain today is part of our daily life. But have we ever thought of these details when we buy products like the following? Clothing / garments: In their manufacturing / weaving, was child labor, slavery, or exploitation involved? Diamonds: Where was it mined, and does this diamond in any way influence / help terrorism? Farm produce: Where and how was it grown? What were the fertilizers or chemicals used?

8 Meat products: How and where were the animals raised? How hygienic and healthy were they? Automotive: What are its components, and are all of them traceable till the raw materials? Electronics: How good are the components for the environment, and what will happen after I dispose of them? Software products: Can the IP be traced back and its authenticity checked till its source? Furniture: From where is the timber sourced? Are we damaging the ecology by using this product? Paper: Can I trace its origin to the forests and trees? Plastic: What happens to it once we dispose of it? Cosmetics: Was animal testing done? Lack of transparency in the supply chain prevents the entities from verifying and validating the true value and reality of products.

9 It obstructs tracking the environmental damage that goes into building the product. There is no way to investigate and account for illegitimate activities associated with the supply chain of the product. Such examples provoke us to question whether the current supply chain information architecture will support or provide this information; and do we need something different from what we have today?like location, date, price, and quantity, which will be available in the distributed ledger. The publicly available information in ledgers would make it possible to trace back every transaction to the grassroots raw material also. The decentralized ledger would make it impossible to manipulate as a single party does not hold ownership.

10 The cryptography-based immutable nature of the transactions would make it almost impossible to compromise the ledger. In fact, it is considered that the Blockchain is unhackable. It is groundbreaking in many ways, including being the: World s first distributed consensus system World s largest distributed peer-to-peer (P2P) network World s first and largest write-only public ledger It is also considered the only ledger that will become more secure with time and Document 2017 Infosys LimitedExternal Document 2017 Infosys LimitedProtocols of blockchainBlockchain operates in the bitcoin network, which is a decentralized network.